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Those Mighty Mini Dots

February 18, 2001

BusinessWeek e.biz -- Cutting Edge

Those Mighty Mini-Dots

Small online businesses thrive in dot-com consolidation

I was afraid it would come to this--just not so soon. Suddenly, the World Wide Web is looking like the Land of the Giants. Check out Nielsen//NetRatings' list of the 15 most-visited Web sites over the holidays: Online Goliath Amazon.com Inc. (AMZN) leads the way, with the help of partner Toys `R' Us (TOY)--a team that may well hasten the demise of the No. 2 site, troubled eToys Inc. (ETYS) Ten other sites are run by physical-world megachains such as Barnes & Noble Inc. (BNBN) and Wal-Mart Stores Inc. (WMT) A few years ago, who would have thought cyberspace would look so much like suburbia?

Yet there's more than meets the eye if you click past the familiar bland names--I mean, brand names. Tens of thousands of small businesses you've never heard of are quietly making a go of it online, providing welcome relief from the big brands. And despite continuing consolidation online, I think the best of these mini-dots will thrive.

Why? Partly because the Net continues to give even the little guys unprecedented opportunity to cut costs and reach new customers. The Florida-based owners of the online antiques emporium eGalleriaMall.com, for instance, saved 90% on overhead by closing their physical stores and selling exclusively online. Says co-owner Joan Valente: "Now, with the Internet, we wait for the world to come to us." That it does, to the tune of $100,000 in sales per month, which Valente expects to double next year.

But mostly these small businesses thrive because they're avoiding the mistakes of their big brothers. For one, since they're often operated by folks who already run small businesses in the physical world, they don't need multimillion-dollar portal deals to reach customers. ElectricShaver.com, for instance, was started in 1995 by Gary Burns, the tech-savvy son of the owner of Electric Shaver Service, a 62-year-old store in Lincoln, Neb. This no-frills site, which got started simply by registering the right Web site name early on, sent me replacement parts that I couldn't find easily in my area. That led me to take a chance on the company's repair service--which fixed a job botched by a local shop. I'm not the only one who's sold on Electric Shaver: Burns says 90% of the company's nearly $1 million in revenue is now from the Web.

Other mini-dots knew not to get too big for their britches. They're focused on narrow niches they know really well, allowing them to provide intensely personal service. Stethoscopes4u.com, for instance, is operated part-time by Joseph A. Rybicki, a nurse anesthetist in New Jersey. Call up his 800 number and you'll get Rybicki himself, who can tell you which stethoscope can detect your baby-to-be's heartbeat in the womb. Says Andrew Beebe, chairman of the small-business services site Bigstep.com: "The personal touch is what will make them succeed."

Of course, most traditional small businesses fail, and many of those online will, too. But surprisingly, it probably won't be because the big guys stomped them. Indeed, some of the online giants are their biggest boosters. eBay Inc.'s auction site, for instance, has helped tens of thousands of people create online businesses selling everything from printer cartridges to Beanie Babies. Amazon and Yahoo! Inc. (YHOO) also run marketplaces and auction sites that make it easy for individuals to start businesses and existing companies to get new customers around the world.

That's one reason it appears that the Internet may well prevent, not accelerate, the demise of many small businesses. According to market researcher Keenan Vision Inc., the 70,000 U.S. e-merchants in 1999 will balloon to 525,000 this year and 2.6 million in 2004--or almost a third of all small businesses.

O.K., so these sites don't always look too slick. So their owners aren't on the cover of e.biz. So they don't earn a ton of money or make venture capitalists and investment banks even richer. So what? By making a living and doing a great job for customers, they're showing the big guys what really matters.By Robert D. Hof, Rob_hof@ebiz.Businessweek.com